New Jersey Real Estate Exam Practice Question
A lender requested that the entire loan balance be paid immediately because the property on which the loan was made had been sold. What clause in the mortgage loan allows this?
Correct Answer: A
Rationale: An alienation clause allows a lender to demand full repayment of a loan if the property is sold or transferred, ensuring the lender retains control over who assumes the mortgage. This is why option A is the correct choice.
The prepayment clause (B) permits borrowers to pay off the loan early without penalty, not requiring immediate payment upon property sale. The condemnation clause (C) addresses compensation when property is taken by the government, unrelated to loan repayment upon sale. Lastly, the defeasance clause (D) allows for the cancellation of a mortgage once the debt is fully paid, which does not apply in this scenario.
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